Cover of MoneyWeek magazine issue no 671

Christmas crackers

20 December 2013 / Issue 671

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Excerpt

Merryn Somerset WebbEDITOR'S LETTER

Merryn Somerset Webb

Alice’s lessons in economics

It’s the time of year to offer Christmas reading lists. But if you haven’t the energy to read much more on finance or politics, just grab an old copy of Through the Looking Glass by Lewis Caroll.

As Chris Andrew of wealth manager Clarmond points out, parts of the sequel to Alice in Wonderland tell you all you need know about today’s economies. The Red Queen amazes Alice with her ability to run very fast without ever getting anywhere.

In our country, says Alice, “you generally get to somewhere else – if you run very fast for a long time as we’ve been doing”. The Red Queen is bemused. “A slow sort of country,” she says. “Now here you see it takes all the running you can do to keep in the same place.”

It’s a perfect metaphor for the global economy and asset prices. To keep things the same (ie, hang on to a little regular economic growth), central bankers and politicians believe we need increasingly loose monetary policy. Does it make economies grow? We have our doubts. But we don’t really know. What we do know is that it makes stock markets grow.

• Read the full editor’s letter here: Alice’s lessons in economics